Monday, December 28, 2009

Why We Have a Health Care Cost Problem and Why It Will Only Get Worse: Other People's Money

The chart above shows why we have a health care cost problem. Patients have little direct connection in paying for their care, and their role has fallen significantly. Meanwhile, the government's involvement has grown, as has that of the insurance industry.

Because so many Americans rely on an insurance policy or a government program to pay their health care bills, the internal governors that temper the rest of their purchases are turned off. When a visit to the doctor's office or a diagnostic test costs them a mere $10 or $20 co-payment out of pocket — or there is no charge at all — cost has little impact on their decision to see a doctor. "By not knowing the full costs associated with health care, consumers demand more and 'overuse' it," Kenneth E. Thorpe explained a few years back in Health Affairs.

Americans would be more judicious in seeking health care — they would self-ration — if the right incentives were in place. An effective way to cut overuse and bring down costs would be to encourage through public policy the use of health savings accounts. If consumers used HSAs to pay the full amount for medical care at the point of service rather than letting employer-funded insurance or a government program pay the bills, the demand would fall.

The Democrats' health care legislation, however, puts more distance between Americans and the payment process and promotes dependence on government. That will only drive down consumers' out-of-pocket expenses even further and force overall health care spending upward. Under such a regime, the system will be worse off than it is now.


~Investor's Business Daily

Global Bull Market Rally: MSCI World Stock Market Closes at 15-Month High, Up 71% from March Low

The MSCI World Stock Market Index reached 1,176.35 today, the highest closing index value since October 1, 2008, almost 15 months ago. From the March low of 688.64, the benchmark world stock index is up by almost 71%, and from the first of the year by almost 28%.

VIX Below 20 for 3 Days, 1st Time Since May 2008

The CBOE Volatility Index (VIX) fell below 20 last week for the first time since August 28, 2008, almost sixteen months ago, and closed below 20 for three days in a row for the first time since late May 2008 (see chart above). See Forbes story below:

CHICAGO (Reuters) - The VIX, Wall Street's favorite measure of investor anxiety, ended last Tuesday (Dec. 22) at the lowest levels since before last year's implosion of Lehman Brothers sparked the worst financial crisis in more than 70 years.

The decline in the Chicago Board Options Exchange Volatility Index, which came as the Standard & Poor's 500 index hit a 14-month closing high, underscores how the fear that gripped markets throughout late 2008 and early 2009 has dissipated in favor of a sunny outlook for 2010. "As investors gear up for year-end, they only see good things for the first quarter of 2010 and, as such, see fewer swings in the stock market," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.

Unwinnable War on Drugs: 6k Murders in Mexico

1. WALL STREET JOURNAL -- In the 40 years since U.S. President Richard Nixon declared a "war on drugs," the supply and use of drugs has not changed in any fundamental way. The only difference: a taxpayer bill of more than $1 trillion. A senior Mexican official who has spent more than two decades helping fight the government's war on drugs summed up recently what he's learned from his long career: "This war is not winnable."

Growing numbers of Mexican and U.S. officials say—at least privately—that the biggest step in hurting the business operations of Mexican cartels would be simply to legalize their main product: marijuana. Long the world's most popular illegal drug, marijuana accounts for more than half the revenues of Mexican cartels.


2.
WASHINGTON POST -- Senior Mexican officials have begun a sweeping review of the military's two-year occupation of this dangerous border city (Ciudad Juarez), concluding that the U.S.-backed deployment of thousands of soldiers against drug traffickers has failed to control the violence and crime, according to officials in both countries. "The most terrifying question that everyone asks is, 'If the army comes in and can't control the situation, what happens to us now?'" asks sociology professor Hugo Almada.

With more than 2,500 homicides, Juarez accounts for more than one-third of the 6,000 drug-related murders in Mexico this year; since April, when a surge of federal troops brought a brief lull in the death toll, the city has resumed a pace of eight to 10 murders a day. The violence has also spilled over into the suburban neighborhoods of El Paso. In a macabre daily ritual, assassins now appear to time their killings so that they get play on the afternoon and evening television news shows. The city estimates that the violence has created 7,000 orphans and displaced 100,000 people, many of whom have fled across the Rio Grande to Texas.

EU Green Protectionism = Economic Madness

Click to enlarge.
Some excerpts from the new study "Green Protectionism in the European Union: How Europe’s Biofuels Policy and the Renewable Energy Directive Violate WTO Commitments" from the European Center for International Political Economy:

Biofuels production in Europe is heavily subsidized. Support has also been increasing in the past years and today stand at approximately EUR4 billion ($5.76B). Another way to look at subsidies is that every litre of ethanol consumed in Europe gets 0.74 EUR (about $4 per gallon) and every litre of biodiesel 0.5 EUR ($2.72 per gallon). The effective rate of assistance to biofuels (taking account of all measures of support) adds up to more than 250% for ethanol (see chart above). Biodiesel, and especially rapeseed crops, have lower effective rates of assistance (up to approximately 60%).

This structure of support and protection is not economically sustainable. It is rather close to economic madness to pursue the sort of self-sufficiency or industrial policy ambitions that have guided EU policy towards biofuels. The total cost of every unit of biofuel becomes far too high, which slows down the readiness to shift away from fossil fuels.

The biofuels policy in the European Union is a classic example of “green protectionism” – protectionism that is not motivated for the benefit of the environment, but which uses environmental concerns to pursue non-environmental objectives. The European Union runs an extensive policy for subsidies to biofuel production. Border protection increases the level of subsidy by giving a market support from consumers to producers. Standards are used to favour domestically produced biofuels. It is difficult to escape the picture of a policy driven by industrial ambitions rather than environmental concerns. The intention and/or the effect of Europe’s policy is associated with beliefs of self-sufficiency. Obviously, trade is not considered to be an integral part of an environmental ambition to shift from fossil fuels to biofuels.

A serious policy to move towards an increased share of biofuels in Europe’s energy mix needs to reconsider the role of trade in achieving this ambition. A shift dependent on domestic production would increase the welfare cost: expensive local biofuels are favored; cheaper foreign biofuels are restricted. Such a policy borders on economic madness; Europe simply does not have the resources to finance all the domestic production needed. Nor does it have comparative or competitive advantages in producing biofuels.

Sunday, December 27, 2009

2009 Global Stock Market Rebound

Year-to-date returns for the MSCI Emerging Markets (data here).


Saturday, December 26, 2009

M2 Growth Falls to 3.7%; Can That Signal Inflation?

Can this really be an inflationary environment with annual M2 money growth at close to the lowest level in 14 years, now at only 3.7% (data here)?

Compulsory Unionism Hits the Self-Employed in MI

Read an interesting WSJ editorial about an unbelievable new scheme in Michigan that forces compulsory union membership on self-employed child care providers to "essentially throw a cash lifeline to unions like the UAW, which are hemorrhaging members."

Consumer Sovereignty: What a Country!

Sherry's Wine & Liquor, Washington D.C.
Consumer sovereignty: People use this term to describe the consumer as the "king" (or "queen"), or ruler, of the market.

Friday, December 25, 2009

Happy Holidays from Information Age 2.0


The graphs above show what have to be historically unprecedented price decreases for any major innovation, technology, or a major consumer item (personal computers) over such a short period of time ever before in human history.

Advances like this in the great Information Age 2.0 happen so consistently but gradually month by month, year by year, that we hardly even ever appreciate, recognize or acknowledge how amazing the last 20 years have been in terms of information technology.
If the 90% reductions took place instantly, it would probably be declared to be a miracle, but when it happens gradually over a decade or more, we take it for granted and even complain and whine about how things could be so much better?

From laptop computers, to high speed Internet access, to email, to LCD TVs, to GPS systems, to iPhones and Blackberrys, to digital cameras, to iPods and hundreds of other technology-related innovations, our lives are immeasurably better than any time in history,
and these graphs tell part of the story - the cost of information and information technology have never been cheaper and directly because of that, our standard of living has never been higher.

Merry Christmas and Carpe Diem!

If You Thought the "Degree Gap" Was High Here...

College admissions directors curious about the experience of touching a third rail can review what happened when the president of the University of Alberta suggested that Canadian males, including white males, needed a helping hand. She got fried ... by her own students.

Last month, President Indira Samarasekera pointed to the preponderance of women in higher education in Canada (see chart above
) and suggested that perhaps males could need some extra attention. "We’ll wake up in 20 years and we will not have the benefit of enough male talent," said Samarasekera, a metallurgical engineer originally from Sri Lanka. “I’m going to be an advocate for young white men, because I can be,” she added, pointing to her Nixon-to-China status as a minority woman advocating for men.

Currently, the University of Alberta grants no admissions preferences to men – unlike scores, perhaps even hundreds, of colleges in the United States that for years have been turning down women for less qualified men. The preferences many colleges give to men are far less formal and less debated than those that help minority applicants, or women applying to some programs. But many, many admissions offices routinely look at male applicants’ test scores and grades with lower expectations than they have when viewing those of female applicants.

What happened to President Samarasekera is just a taste of what’s in store for these colleges when thousands of female high school students and their parents discover that the college of their dreams is a farther reach for them than for the slacker boy next door.

And they will find out, because in roughly six months the U.S. Commission on Civil Rights will release its findings on the breadth of the preferences practice. Among higher education insiders, there’s not much mystery to the investigation: favoring men is an open secret at private, four-year colleges, where there’s no legal penalty for helping men. Actually, it’s even done by some public colleges willing to roll the dice in the hope they won’t get sued.

How, you ask, has this remained a secret so long? Because all the interested parties have signed off on the conspiracy.

Feminist groups studiously ignore the issue of women dominating college campuses; it drains credibility from their claim as a disadvantaged group in need of redress. The day after the recent commission announcement it was investigating bias against women, groups such as National Organization for Women and the American Association of University Women were silent on the news -- despite this being an issue presumably dear to their hearts.


Read more here of the Inside Higher Ed commentary by Richard Whitmire, author of a new book, Why Boys Fail: Saving Our Sons from an Educational System That's Leaving Them Behind, and blogger at Why Boys Fail.

See related Washington Post story "Sex Bias Probe in Colleges' Selections."

MP: The chart above shows the number of female college graduates (bachelor's degrees) per 100 male graduates in both Canada (data here) and the U.S. (data here) from 2003-2007. For the most recent year of actual data (2007), there were 163 female college graduates in Canada for every 100 male graduates, as women received almost 62% of all bachelor's degrees. In the U.S. women received almost 58% of all bachelor's degrees in 2007, and therefore earned 137.4 degrees for every 100 males.


HT: Nick Schulz


Thursday, December 24, 2009

America's Ridiculously Large $14T Economy

I took some criticism for the post below comparing the amount of durable goods manufactured in the U.S. in November to the entire annual output of goods and services (GDP) in some other countries. Perhaps I wasn't clear enough in my comparison, but I was trying to make the point that we lose sight of the ridiculous size of the U.S. economy ($14 trillion of annual output) and one way to put it in perspective is to show that just the manufacturing output (ignoring services and government) in the U.S., in just one month (ignoring the other 11), is about the same amount of output for all goods and services over the entire 12 months in many countries like Singapore, Chile and the Philippines.

Maybe the map above from a CD post in 2007 does a better job of demonstrating how large the $14 trillion U.S. economy is, by matching gross domestic product in 2006 for each of the fifty U.S. states (data here) to comparable GDP of entire countries (data here).

Nov. Durable Goods Exceed Annual GDP of Chile

CENSUS BUREAU -- Shipments of manufactured durable goods in November, up three consecutive months, increased $0.5 billion or 0.3 percent to $175.9 billion.

For the entire year of 2008, the entire output (GDP) of these countries was:

Singapore: $181.9 billion

Ukraine: $179.6 billion

Chile: $169.5 billion

Philippines: $166.9 billion

Pakistan: $164.5 billion

Bottom Line: In just the single month of November (a month following a severe recession and with durable goods about 25% below their pre-recession level), the value of durable goods manufactured in the U.S. is close to or even exceeds the entire output of many countries in the world like Chile and Philippines.

Quote of the Day

Christmas begins about the first of December with an office party and ends when you finally realize what you spent, around April fifteenth of the next year.

~P.J. O'Rourke, Modern Manners

Jobless Claims (Four-Week Moving Average) Fall for 16th Consecutive Week to a 15-Month Low


The Department of Labor reported today that initial claims for unemployment (4-week moving average) fell to 465,250 for the week ending December 19, which is the 16th consecutive weekly decline in claims, and the lowest level since the week of September 20, 2008, exactly 15 months ago (see chart above).

Wednesday, December 23, 2009

100 Things Restaurant Staffers Should Never Do

I'm in a trendy DC restaurant in the Woodley Park neighborhood, sitting at the bar, watching an overweight bartender munching down on a large pizza about three feet from me (it's so close I could reach over and help myself to a slice, and this is at least the second time this has happened here). Am I crazy, or isn't this totally inappropriate? Hey, I'm not 100% sure of restaurant etiquette, so using my laptop to check the "perfect recall of silicon memory," aka the Internet (wireless is available here), I found this in about 15 seconds from the NY Times:

100 Things Restaurant Staffers Should Never Do:

#35. Do not eat or drink in plain view of guests.

Here's another one I think is good:

#32. Never touch a customer. No excuses. Do not do it. Do not brush them, move them, wipe them or dust them.

And I like this one:

#43. Never mention what your favorite dessert is. It’s irrelevant.

I've written before about how I think it's insane to ask a perfect stranger (waiter or waitress) for advice on what they think you would like best. If I'm not sure I know what I want to eat, how would a total stranger be of any help?

Now in the pre-Internet days, I would have had to make a visit to a local library in the next few days, and find a reference book or article on restaurant etiquette. Now I can be upset immediately, without having to wait for confirmation.


Retail Health Clinic Updates

1. Scott Jagow at Marketplace writes about his recent experience getting "Fast, Cheap, and Happy Health Care" at a Minute Clinic.

2.
Ronald Bailey at Reason speculates what real market-based health care reform would look like: A lot of routine care could be handled through retail health clinics located in shopping malls, drug store chains, and megastores. Such centers would be staffed not with physicians but with nurse practitioners or other qualified personnel. Consumers generally would pay for routine, everyday transactions directly out of their health savings accounts.


3. Minute Clinics have become the de facto "nation's pharmacy" by offering H1N1 vaccinations on demand, seven days a week with no appointment necessary at its clinics around the country in
20 states and the District of Columbia.


Detroit Homes for Less Than $100, Starting at $10

Price = $10 (2 bedrooms, 1 bath)
Price = $15 (3 bedrooms, 2 baths)

Price = $75 (3 bedrooms, 1 bath)

Price = $99 (3 bedrooms, 1 bath)

Florida Home Sales Increase for 15th Month, Southern California Homes for 17th Month

1. Florida’s existing home sales rose in November, marking 15 months that sales activity has increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors.

2. Southern California’s housing market continued its step-by-step climb up from the January-February bottom as both sales and prices saw gains last month. A total of 19,181 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 13.3 percent from October’s 22,132, and up 14.7 percent from 16,720 for November 2008, according to MDA DataQuick of San Diego. The year-over-year increase was the 17th in a row.

Manufacturing Employment Falls to Record Lows, But Productivity Soars to Record High Levels

Here’s some pretty grim news about U.S. manufacturing -- employment in that sector fell below 12 million this year for the first time since 1946, and is now at the lowest level (11,648,000 manufacturing jobs in November) since March of 1941 (see chart, BLS data here). Since the onset of the recession in December 2007, manufacturing employment fell for 24 consecutive months, as the U.S. economy shed an average of 89,000 manufacturing jobs each month for the last two years.

From the peak manufacturing employment of 19.55 million jobs in 1979, the American manufacturing workforce has shrunk by more than 40%, as almost 8 million manufacturing jobs have been eliminated over the last thirty years, with almost 6 million of those losses taking place just since 2000. And there’s nothing to suggest that the trend won’t continue, so we can expect a continued contraction of U.S. manufacturing employment.

See related story here about
Michigan's population falling below 10 million.

But what about manufacturing output? That news is a little better. The chart below shows the decline in manufacturing employment plotted against the Gross Value of Final Products and Nonindustrial Supplies (in billions of constant 2000 dollars), as calculated by the Federal Reserve (
data here). In the thirty year period between 1977 and 2007, U.S. manufacturing output doubled from $1.5 trillion to $3 trillion, before dropping to a ten-year low in June 2008 of $2.6 trillion, from the contractionary effects of the recession. Manufacturing output has been rebounding lately and it increased in four out of the last five months, after falling in ten out of the previous 11 months, signalling that the economy moved from recession to expansion in the middle of the year.

Pretty grim so far, but here's where the news about the manufacturing sector gets better. According to the Federal Reserve, the dollar value of U.S. manufacturing output in November was $2.72 trillion (in 2000 dollars), which translates to $234,220 of manufacturing output for each of that sector’s 11.648 million workers, setting an all-time record high for U.S. manufacturing output per worker (see chart below).


Workers today produce twice as much manufacturing output as their counterparts did in the early 1990s, and three times as much as in the early 1980s, thanks to innovation and advances in technology that have made today’s workers the most productive in history.

Bottom Line: At the same time that manufacturing employment has been declining to record low levels, manufacturing output keeps increasing over time (except during recessions of course), and the amount of output that each manufacturing worker produces keeps rising almost every month to new record high levels. Manufacturing productivity has never been higher, and that's good news.

See related Enterprise post here.

Tuesday, December 22, 2009

Close-up Photos Showing Frost's Natural Beauty

Here are some amazing close-up photographs of frost on a very cold window in a house in Minneapolis when it was 30 degrees below zero, highlighting the natural beauty of early morning sunlight streaming through the frost, captured from inside the house by Minneapolis photographer and musician Marcus Wise:





Bloomberg Financial Conditions Index Reaches Positive Territory for First Time Since Aug. 2007

When it comes to the financial crisis of 2007-2009, the month of October 2008 was "Ground Zero," by several measures:

1) The Chicago Board Options Exchange Volatility Index (VIX), a popular measure of the implied volatility of S&P 500 index options, soared to a record high of 80.06 on October 27, 2008 from less than 20 just 2 months earlier (the VIX is now below 20).

2) The TED Spread, a popular gauge of credit risk (measured by the difference between the 3-month LIBOR rate and the 3-month risk-free Treasury bill rate), soared to an all-time record high of 456.485 basis points on October 13, 2008 (it's now less than 18 basis points).

3. The Bloomberg U.S. Financial Conditions Index dropped to an unprecedented, historical low of -11.5 on October 10, 2008, falling by nine full points in just 30 days (see chart above).

All three of these financial market indicators have returned to their pre-crisis levels, and the U.S. Bloomberg U.S. Financial Conditions reached an important benchmark level today - it closed above zero for the first time since August 8, 2007, more than 28 months ago. Add this important event today for the Bloomberg Index to the growing list of economic and financial indicators suggesting that the recession is over, the economic recovery is real, and the financial markets have now returned to their pre-crisis levels.

RECOVERY: Existing Home Sales Highest Since Feb. 2007, Inventory Levels Lowest Since April 2006


Highlights from today's report on existing home sales:

1. Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.4% to a seasonally adjusted annual rate of 6.54 million units in November from 6.09 million in October, and are 44.1% higher than the 4.54 million-unit pace in November 2008. Current sales remain at the highest level since February 2007 when they hit 6.55 million (see top chart).

2. Total housing inventory at the end of November declined 1.3% to 3.52 million existing homes available for sale, which represents a 6.5-month supply at the current sales pace, down from a 7 month supply in October. Raw unsold inventory figures are 15.5% below a year ago. The last time there was a lower supply of homes on the market was April 2006 when it was at a 6.1 months supply (see bottom chart above).

Bottom Line: The news today confirms that the national real estate market is in a gradual, but unmistakable recovery. Home sales have increased in 7 out of the last 8 months, and by almost 1.5 million units combined for the last three months (450,000 gain in Sept., 550,000 in Oct. and 450,000 in Nov.). From the March low of 4.55 million units, November sales are up 44%. Home prices have firmed and stabilized, and the balance between the supply and demand (measured by the months supply of inventory) has returned to the 2006 level. Taken together, these trends provide strong evidence that the worst is definitely behind us for the U.S. housing market, market conditions are returning to pre-recession levels, and even better days are ahead.

Politicized "Science"

When a business accused of fraud begins shredding its memos and deleting its e-mails, the media are quick to proclaim these actions as signs of guilt. But, after the global warming advocates began a systematic destruction of evidence, the big television networks went for days without even reporting these facts, much less commenting on them.

People who have in the past applauded whistleblowers in business, in the military, or in Republican administrations, and who lionized the New York Times for publishing the classified Pentagon papers, are now shocked and outraged that someone dared to expose massive evidence of manipulations, concealment and destruction of data-- and deliberate cover-ups of all this-- in the global warming establishment.

Today, politicized "science" has too big a stake in the global warming hysteria to let the facts speak for themselves and let the chips fall where they may. Too many people-- in politics and in the media, as well as among those climate scientists who are promoting global warming hysteria-- let the raw data on which their calculations have been based fall into the "wrong hands."

People who talk about the corrupting influence of money seem to automatically assume that it is only private money that is corrupting. But, when governments have billions of dollars invested in the global warming crusade, massive programs underway and whole political careers at risk if that crusade gets undermined, do not expect the disinterested search for truth.


~Thomas Sowell

College: Everything's Going Up Except Core Faculty

The chart above helps to answer the question "Where does all the tuition go?" (see post below).

The University of Michigan-Flint reflects a national trend that could be described as a gradual but persistent shift away from relying on full-time, tenured or tenure-track, “core faculty” to fulfill an institution's teaching mission, and a trend towards an increase in both full- and part-time lecturers. And at the same time that the number of full-time core faculty shrinks, the number of academic programs have increased significantly at most universties, along with huge increases in full-time adminstrative positions.

In other words, everything is increasing at most universities: students, part-time faculty, full-time lecturers, academic programs, and full-time administrators, and TUITION (adjusted for inflation), except for the number of full-time tenured or tenure-track core faculty.

Yield Curve, Investor Optimism at Record High

WSJ -- A closely watched bond-market measure of investor optimism hit a record Monday, amid signs the U.S. economy's recovery is strengthening. That measure is the yield curve -- the difference between short-term and long-term interest rates on government bonds. That number is at its highest level ever, surpassing the record set in June, and signals that investors are expecting a stronger economic turnaround ahead.

The interest-rate development is good news for banks, which normally borrow at short-term rates and lend at long-term rates. The bigger the difference, all else being equal, the bigger their profit. Higher profits mean banks can refill their coffers, which have been drained by bad debts, and return to health.

The yield curve steepens when the Federal Reserve, which controls short-term interest rates, keeps them low to spur the economy. But at the same time investors, expecting growth to resume and with it the possibility of inflation, sell longer-term government bonds, which sends their prices down and their yields up. The difference between the yields, in this case on 2-year and 10-year notes, is the main gauge of the yield curve. On Monday, the difference reached 2.81 percentage points (see chart above). The gap between short- and long-term yields tends to stretch on the way out of economic trouble.

Before this year, the yield curve was last near these levels in 1992 and 2003. In both instances, the economy was pulling out of a recession, and staged a sustained recovery. However, on both occasions it took a year or more before the Federal Reserve decided the economy was strong enough to warrant interest rate increases. At this time last year, the gap was 1.27 percentage points. At the crisis onset, in June 2007, the yield curve was inverted: a phenomenon in which short-term yields are higher than long-term ones, a development which often augurs a recession.

Cartoon of the Day: Short-Run, Long-Run


Monday, December 21, 2009

Where Does All That Tuition Go?

Hint: Not to full-time instructional costs.

We know that the costs of attending postsecondary institutions are increasing at a rate higher than inflation. And there is evidence that institutions are using a disproportionate share of these revenues for institutional and administrative costs rather than for instructional ones. This (mis)allocation is taking place in an environment in which the federal and state governments continue to pump large amounts of money into higher education without asking institutions to meet performance standards.

~AEI report "
Where Does All That Tuition Go?" by Mark Schneider

St. Louis Ticket Scalpers Now Engaged in "Ticket Dumping" and "Predatory Ticket Pricing?"

St. Louis Post-Dispatch -- The Rams aren't the only ones having trouble selling tickets to their games. For the scalpers on the streets outside the Edward Jones Dome, the ticket market is every bit as sluggish.

The Rams' game against the Houston Texans on Sunday not only didn't sell out, the second straight game where seats went empty, but the crowd of 46,256 was the smallest ever for the Rams in St. Louis. As fan interest in the team drops, so is the desire of people to pay $44 or more to watch them play. And if the secondary market is any indication, many fans are prepared to pay a lot less to watch the team.

"Business is down," said Dennis Brown, standing near the Dome's northwest entrance shortly after game time on Sunday, waiting for a colleague to sell the last of their tickets. "In the good years, we would get good money, more than the price of a ticket. Anytime you've got a team like this that's 1-13, you can look to paying (almost) nothing. They're selling from $44 to $100 at the box office, they can come out here and get them from $25 to $75."

Q: If "ticket scalpers" are selling tickets for less than face value, are they still engaged in "ticket scalping" or is it now "ticket dumping," or "predatory ticket pricing?"

Interesting Website: BBC's On This Day 1950-2005

On This Day is a showcase of some of the most significant as well as some of the quirkier stories broadcast by BBC News since 1950 and now including a new World War II section. On this day (12/21) in:

1988: Jumbo jet crashes onto Lockerbie

1958: Easy victory for de Gaulle

Natural Gas: It's Cleaner Than Coal, Cheaper Than Oil and We Have a 90-Year Domestic Supply

ASSOCIATED PRESS -- An unlikely source of energy has emerged to meet international demands that the United States do more to fight global warming: It’s cleaner than coal, cheaper than oil and a 90-year supply is under our feet.

It’s natural gas, the same fossil fuel that was in such short supply a decade ago that it was deemed unreliable. It’s now being uncovered at such a rapid pace that its price is near a seven-year low (see graph above, data here). Long used to heat half the nation’s homes, it’s becoming the fuel of choice when building new power plants. Someday, it may win wider acceptance as a replacement for gasoline in our cars and trucks.

It is estimated that the U.S. sits on 83 percent more recoverable natural gas than was thought in 1990.Thanks to the introduction of horizontal drilling technology that has unlocked stunning amounts of gas in what were before off-limits shale formations. Estimates of total gas reserves have jumped 58 percent from 2004 to 2008, giving the U.S. a 90-year supply at the current usage rate of about 23 trillion cubic feet of year.

Natural gas’ abundance and low price come as governments around the world debate how to curtail carbon dioxide and other pollution that contribute to global warming. The likely outcome is a tax on companies that spew excessive greenhouse gases. Utilities and other companies see natural gas as a way to lower emissions — and their costs. Yet politicians aren’t stumping for it.

In June, President Barack Obama lumped natural gas with oil and coal as energy sources the nation must move away from. He touts alternative sources — solar, wind and biofuels derived from corn and other plants. In Congress, the energy debate has focused on finding cleaner coal and saving thousands of mining jobs from West Virginia to Wyoming.

Utilities in the U.S. aren’t waiting for Washington to jump on the gas bandwagon. Looming climate legislation has altered the calculus that they use to determine the cheapest way to deliver power. Coal may still be cheaper, but natural gas emits half as much carbon when burned to generate the same amount electricity.

We'll Suffer from Obama's Self-indulgent Crusade to Seize the Liberal Holy Grail of "Universal Coverage"

Barack Obama's quest for historic health-care legislation has turned into a parody of leadership. We usually associate presidential leadership with the pursuit of goals that, though initially unpopular, serve America's long-term interests. Obama has reversed this. He's championing increasingly unpopular legislation that threatens the country's long-term interests. "This isn't about me," he likes to say, "I have great health insurance." But of course, it is about him: about the legacy he covets as the president who achieved "universal" health insurance. He'll be disappointed.

Even if Congress passes legislation -- a good bet -- the finished product will fall far short of Obama's extravagant promises. It will not cover everyone. It will not control costs. It will worsen the budget outlook. It will lead to higher taxes. It will disrupt how, or whether, companies provide insurance for their workers. As the real-life (as opposed to rhetorical) consequences unfold, they will rebut Obama's claim that he has "solved" the health-care problem. His reputation will suffer.

The various health-care proposals represent atrocious legislation. To be sure, they would provide insurance to 30 million or more Americans by 2019. People would enjoy more security. But even these gains must be qualified. Some of the newly insured will get healthier, but how many and by how much is unclear. The uninsured now receive 50 to 70 percent as much care as the insured. The administration argues that today's system has massive waste. If so, greater participation in the waste by the newly insured may not make them much better off.

So Obama's plan amounts to this: partial coverage of the uninsured; modest improvements (possibly) in their health; sizable budgetary costs worsening a bleak outlook; significant, unpredictable changes in insurance markets; weak spending control. This is a bad bargain. Health benefits are overstated, long-term economic costs understated. The country would be the worse for this legislation's passage. What it's become is an exercise in political symbolism: Obama's self-indulgent crusade to seize the liberal holy grail of "universal coverage." What it's not is leadership.

~Robert Samuelson in today's Washington Post

HT: Ron Adams


Markets in Everything: Eyeball Tattoos

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Another V-Sign of Economic Recovery: Chicago Fed

Led by improvements in production-related and employment-related indicators, the Chicago Fed National Activity Index increased to –0.32 in November, up sharply from –1.02 in October. Two of the four broad categories of indicators that make up the index improved, although only the production and income category made a positive contribution.

The index’s three-month moving average, CFNAI-MA3, increased to –0.77 in November from –0.87 in October (see chart above). November’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend, but the level of activity remained in a range that has historically been consistent with the early stages of a recovery following a recession. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 indicates low inflationary pressure from economic activity over the coming year.

Production-related indicators made a contribution of +0.35 to the index in November, compared with –0.09 in October. This contribution accounted for much of the improvement in the index in November. Industrial production rose 0.8 percent in November after being unchanged in October; and manufacturing production increased 1.1percent in November after decreasing 0.2 percent in the previous month. Furthermore, manufacturing capacity utilization increased to 68.4 percent in November from 67.6 percent in October.

Facts of the Day About Detroit

1. Detroit Mayor Dave Bing in the WSJ: "Today in the city of Detroit, our union employee benefits cost 68% of what their base wage is. I don't think that happens in any other place in the country." To give a sense of how excessive those pay packages are, he adds, "When you look at one of the most dominant labor unions in the world, the UAW, they're nowhere close to what we give our city workers."

2. Mayor Bing grumbles that there are 17 unions with over 50 separate bargaining units. "I can give you a data sheet that will show you we've got several of those bargaining units with fewer than 100 people, and each one of them has a president who is paid by the city to negotiate against the city," he says. "Coming from the private sector, I find that insane."

3. According to the U.S. Census Bureau, Detroit ranks #1 as the city with the highest percentage of people living below the poverty level at 32.5%.

4. According to the Michigan Association of Realtors, the average sale price of a home in Detroit (YTD through October) is $12,342.

Another V-Sign of Economic Recovery: Temp Jobs

NY TIMES -- The hiring of temporary workers has surged, suggesting that the nation’s employers might soon take the next step, bringing on permanent workers, if they can just convince themselves that the upturn in the economy will be sustained. Last month 52,000 temps were added, greater than the number of new workers in any other category. Not even health care and government, stalwarts through the long recession, did better. The unemployment rate fell in 36 states in November partly because of the growing use of temps.

As demand rose after the last two recessions, in the early 1990s and in 2001, employers moved more quickly. They added temps for only two or three months before stepping up the hiring of permanent workers. Now temp hiring has risen for four months, the economy is growing, and still corporate managers have been reluctant to shift to hiring permanent workers, relying instead on temps and other casual labor easily shed if demand slows again.


MP: After falling for nineteen consecutive months from January 2008 to July 2009, the number of temporary jobs has now increased in each of the last four months, and the 52,400 increase in November was the largest monthly increase in more than five years (since October 2004).

HT: Erik Babosci


U.S. Remains Largest Manufacturer in the World

According to the Federal Reserve, the value of U.S. manufacturing output in 2008 was $2.946 trillion, measured in 2000 dollars. Converted to 2008 dollars (link), that would be about $3.7 trillion, and the chart above shows how the U.S. manufacturing sector compares to the entire output, or GDP, of the top five largest economies in the world in 2008 (data): Japan ($4.9 trillion), China ($4.3T), Germany ($3.7T), France ($2.9T) and U.K. ($2.7T).

Bottom Line: If the U.S. manufacturing sector were a separate country, it would be tied with Germany as the world's third largest economy. It would also be larger than the entire economies of India and Russia combined. As much as we hear about the "demise of U.S. manufacturing," and how we are a country that "doesn't produce anything anymore," and how we have "outsourced our production to China," the U.S. manufacturing sector is alive and well, and the U.S. is still the largest manufacturer in the world.

Sunday, December 20, 2009

Christmas Shopping for a Laptop: 2000 vs. 2009

Cost of a Gateway laptop with 12.1-in. display, 550MHz chip and a year of free AOL in 2000: $1300 ($1633 in today's dollars)

Cost of a
Dell Inspiron 15 laptop, with Intel® Core™ 2 Duo P7450 (2.13GHz/1066Mhz FSB/3MB cache), 15.6 inch display in 2009: $634

MP: Compared to just nine years ago, you can now get more than twice the laptop computer for less than half the price.

Chicago Wal-Mart Update: Mom-and-Pops Invited

NY TIMES -- Stung by criticism that their megastores shutter mom-and-pop shops, Wal-Mart officials are offering to rent space in the lobby of a new Chicago store to neighborhood businesses. Wal-Mart’s tenants already include a dog groomer at a store in north suburban Zion and an Uncle Remus fried chicken outlet in its only Chicago store, on the West Side.

The company is promising to expand that practice at a proposed South Side location, inviting aldermen and other leaders to recommend barbers, manicurists, banks, fast-food chains and other businesses that would give the store some local flavor.

The West Side Wal-Mart stocks several local products, including Mexifeast tamales and La Criolla spices, said Rolando Rodriguez, the regional general manager. “We want the same resurgence of the community as we created on the West Side,” he said.

Wal-Mart is hoping the local offerings will help revive its unsuccessful six-year push for the city’s approval of proposed Chicago stores. Mayor Richard M. Daley this week reiterated his support for Wal-Mart’s plans. But the company refuses demands that it promise higher wages, and not everybody was impressed with the chain’s latest effort.

“It’s like sharecropping,” said Marissa Johnson, who owns a paralegal service near the site of the proposed store, in the Chatham neighborhood. She said she feared that Wal-Mart would put a lot of her local clients out of business, creating more vacant storefronts.


MP: The last sentence should be clarified as follows - "She feared that local consumers, when given a choice between Wal-Mart's low prices, huge selection, and convenient hours, and the less competitive options at local merchants, would abandon the local merchants in favor of Wal-Mart." Wal-Mart can't force people to shop at its stores; all it can do is offer a low-priced alternative to the high-priced local "mom and pop" merchants. If local merchants fail, they should blame it on "consumer greed," not Wal-Mart.


Thanks to Erik Babocsi for sending the NY Times link.

Saturday, December 19, 2009

Medicine is Complicated, So Are Computers: You Can Get Price for iMac, But Not Ingrown Toenail

Health-care prices are a mishmash for lots of reasons, but one of the main ones is the way we pay for health care — you don’t pay the doctor, your insurance company does, an arrangement that gives at least two of the three parties involved a good incentive to obscure prices, so that the consumer has no idea how good or how rotten a deal he is getting while the insurers and hospitals attempt to game and swindle each other. Given the shocking and terrifying size of serious medical bills — my mother’s last stay in the hospital billed out at $360,000 -- the American health-care consumer, quaking in his paper hospital slippers, no longer even asks:What does this procedure cost?” He only asks: “Does my insurance cover it?” No prices, no negotiation, no mystical coordination between producer and consumer — instead, maddening and expensive and often underhanded mediation by the insurer.

Medicine is complicated; computers are complicated, too, but you can call Dell or Apple or Best Buy or whomever and ask: “What does this sort of computer cost?” and you will receive an answer. And then, when you get to the store — miracle of miracles! — that will be the price. Computers are damned complicated to make, with programmers in the United States and India collaborating with Taiwanese microchip fabricators, Dutch LED manufacturers, Irish customer-support agents, etc. You can get a price on an iMac, but you can’t get a price quote on an ingrown toenail.


~"
Priceless is Worthless" by Kevin Williamson in National Review (subscription required)


Thanks to Pete Friedlander.

Update: Full article here.

21 Things That Became Obsolete This Decade

PDAs, email accounts you have to pay for, dialup, getting film developed, pay phones, newspaper classifieds, landline phones (even 30-45% of the homeless have cell phones), etc. Link.


Christmas Shopping for a Camera: 2000 vs. 2009

Cost of a Nikon 3.0 megapixel camera in 2000: Twisty CoolPix 990 for $1000, $333.33 per megapixel

Cost of a Nikon 10.0 megapixel camera in 2009: CoolPix for $189.99 $189.99 (pictured below), $18.99 per megapixel

Bottom Line: The dollar cost per megapixel has fallen by 94.3% since 2000, from $333.33 in 2000 to $18.99 today.

See more here of "10 Obsolete Gadgets That Made Great Gifts in 2000" (HT to Juandos)

Markets in Everything: iTunes Gift Cards Selling on eBay for More Than Cash Value; "Gift Card Scalping"

What's going on here? The examples above of completed eBay auctions are just two of hundreds of examples of iTunes gift cards selling for more than their face value on eBay. Isn't this "gift card scalping"?

Christmas Shopping for a VCR/DVD: 1981 vs. 2009

Cost of a Sears VCR in 1981: $1389.88, or 187.3 hours of work (23.4 days or 4.7 weeks) at the average hourly wage of $7.42 (total private industries).

Cost of a Sears VCR/DVD combo in 2009:
$74.99 or 4hours of work at the current average hourly wage of $18.74.

Bottom Line: If we paid the same price ("time cost") today for a VCR as in 1981 (187.3 hours at the average hourly wage of $18.74), a VCR today would cost $3,510. Or equivalently, consumers in 1981 actually paid the equivalent of $3,510 in today's dollars. Alternatively, the typical consumer today would earn enough money on a single day before lunch (4 hours) to purchase a brand new VCR/DVD player, and the typical consumer in 1981 had to work full-time for almost five weeks to earn enough money to purchase a VCR then.

This is the best holiday season ever,
see Reason.tv video.

Another V-Sign of Economic Recovery: ECRI

NEW YORK, Dec 18 (Reuters) - A weekly measure of future U.S. economic growth continued to rise, reaching levels hit in the summer of 2008, while its yearly growth rate climbed toward recent record levels, a research group said on Friday, saying this reaffirmed its forecasts of smooth recovery into 2010. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 130.7 in the week ended Dec. 11 from an upwardly revised 130.2 the previous week (see chart above).

Friday, December 18, 2009

38 States Now Have Smoking Bans

MICHIGAN DAILY -- Governor Jennifer Granholm signed a bill that prohibits smoking in public areas statewide into law today, making Michigan the 38th state to enact such legislation.

MP: Of course, the article doesn't mention the 12 states without a smoking ban, and here's an example below of why I love Wikipedia, it took 30 seconds to find this. Also, Wikipedia was updated today to reflect the change in Michigan law that was enacted only yesterday.

WIKIPEDIA -- As of December 2009, 12 states have not enacted any general statewide ban on smoking in any non-government owned spaces: Alabama, Alaska, Indiana, Kansas, Kentucky, Mississippi, Missouri, Oklahoma, South Carolina, Texas, West Virginia, and Wyoming.


Hypocrisy Offsets Now Available for 15th United Nations Climate Change Conference (COP 15)

Copenhagen, Denmark: The National Center for Public Policy Research is showcasing the hypocrisy of the carbon-emitting travels of global warming activists at COP-15 in Copenhagen by offering conscience-clearing "hypocrisy offsets" to attendees (see sample above). The hypocrisy offsets parody carbon offsets sold and traded allegedly to allow people to live carbon-neutral lives. The hypocrisy offsets also highlight the insincerity of world-traveling, energy-guzzling COP-15 delegates.

"Many of those in attendance to press for additional commitments for carbon reductions traveled thousands of miles and used substantial amounts of carbon-emitting jet-fuel just to get to the conference," said David Ridenour, vice president of the National Center for Public Policy Research. "We are exposing the hypocrisy by offering them 'hypocrisy offsets' to alleviate their green guilt. As one who is skeptical of the necessity of draconian carbon cuts, I plan to do my part to ensure plenty of hypocrisy offsets are available. I'll refrain from reducing my own personal carbon footprint."

"Environmentalists are in Copenhagen demanding global limits on emissions, but they don't want to follow the very rules they are proposing for the rest of the world," said Amy Ridenour, president of the National Center for Public Policy Research. "Their participation may earn them some media coverage, but it is having no effect on an agreement. In fact, the United Nations mostly banned them from even entering the conference, so their voluntary contribution to carbon emissions -- emissions they insist imperil the planet -- from this unnecessary travel is a stunning act of hypocrisy. Because we know they must be feeling very guilty about what they've done, and in most cases intend to continue doing indefinitely, we invented hypocrisy offsets as a humanitarian act."


Watch this related video "Limos at the COP15 Copenhagen" (HT: Cafe Hayek)


Nov. Jobless Rate Fell in Almost 3 of 4 States

1. Thirty-six states and the District of Columbia recorded over-the-month unemployment rate decreases in November, 8 states registered rate increases, and 6 states had no rate change, the Bureau of Labor Statistics reported today.

2. In November, nonfarm payroll employment increased in 19 states and decreased in 31 states and the District of Columbia. The largest over-the-month increase in employment occurred in Texas (+17,300), followed by Ohio (+5,400), Georgia (+4,800), and Arizona and Iowa (+4,300 each). Alaska experienced the largest over-the-month percentage increase in employment (+0.5 percent), followed by Iowa (+0.3 percent).

Update on The "NYC Taxi Cartel"

NEW YORK (August 7, 2009) -- As Wall Street still wobbles under the pressure of a weak economy, one New York asset class stands firmly on all four wheels. Taxi medallions — required licenses fastened to the hoods of all New York City yellow cabs — have rocketed in value at a time when many investments have plummeted. The average rate in July for a corporate-licensed taxi medallion in the Big Apple was a record $766,000 — up 126% from $339,000 in 2004.

"It's an industry that has always gone up," says Andrew Murstein, president of Medallion Financial. "It has outperformed every index you can think of — the Dow, Nasdaq, gold, you name it."

In a ratio set by law, 40% of New York's 13,257 medallions — a number strictly controlled by the city — are designated for individual, as opposed to corporate, ownership. Individual owners are required to drive at least part time, while corporate owners have the option of hiring an agent to lease the medallion full time for up to $800 a week.

MP: That USA Today report was from July, and the "priciest piece of aluminum in NYC" - a taxi medallion to operate a single cab in NYC - has gone up another $13,000 since then, reaching a new record-high of $779,000 in November for a corporate medallion (see chart above,
data here), almost double the average price of $391,000 just four years ago in November 2005. The average price for an individually-owned taxi medallion also reached a new record high in November at $579,000, a two-fold increase since the summer of 2004.

Membership in the "taxi cartel" certainly has its privileges: above-market returns (18.1% per year for corporate medallions and 15.7% for individual medallions, vs. -0.52% per year for the S&P 500 since 2004), see previous CD posts
here and here.

Capitalism Is the Driver of Real, Sustained Growth

There’s an old saying: “Everyone’s a capitalist on the way up and a socialist on the way down.” People want it all—to reap the benefits of free markets, but be protected against any downside. Capitalism won’t abide. And that’s a good thing. It’s a system of inherent checks and balances, which can be swift and brutal during the pruning process. In rough times, we seem willing to sacrifice free markets’ benefits for perceived security from this process. Still, if free markets were restricted, what would happen to those checks? Subprime problems (or Bernie Madoff’s) were not revealed by regulators, but by markets. Note, politicians are human, too.

Capitalism and free markets are not ever-stable. They work precisely because they compel folks to take risks and seek to create excess value out of existing capital, in whatever form that might be. They’re examples of constant change and innovation. Change isn’t always comfortable—and much of it will fail—but when it moves society in a more efficient direction, society certainly becomes more profitable.

During crises, the balance always tilts toward government and away from capitalism. This doesn’t mean capitalism is done. But such things are always said in times like these. Government “solutions” can only carry the economy so far—it’s up to capitalism to drive real, sustained growth. That is, it’s up to the people who make an economy, not its turgid overseers.


~
Fisher Investments Editorial Staff (12/26/2008)

MP: I posted this about a year ago, but it's a timeless message that is still as relevant today as last year, maybe even more so.